Most market analysts and farm advisors agree that farmers shouldn’t change their overall marketing plans over the next 12 months specifically because of the COVID-19 pandemic and its potential future effects on trade and global economies.
That said, this is without doubt a year unlike any other, and to be prepared for the possibility of greater volatility and disruptions to markets and to people’s lives around the world, it could be prudent to spend more time on business management practices and take a wider view of what’s happening in terms of things like consumer behaviours and the entire value chain.
Farmers who understand how consumers and the value chain have changed and have sound business management practices will be better prepared for the challenges 2020 and 2021 may present.
Peter Chapman of SKUFood is a retail marketer, author, speaker and consultant with 30 years of experience in the Canadian food industry. He is an expert in all aspects of the value chain and believes that every sector of the food industry, including farmers, should be evaluating their market plans in the context of how the whole value chain, including consumers, has been changed.
As an example, Chapman says the makeup of the Canadian food industry used to be split at around 70 per cent retail and 30 per cent food service and institutional. Today the split is closer to 90 and 10 per cent, respectively.
“Producers who are selling their product to processors that are serving the food service market are going to have a lot of challenges because the demand is still not back to what they would have planned for,” says Chapman.
On the flip side, there is still plenty of demand on the food retail side of things. “If you go down the baking aisle in the grocery store there are still holes and products that we aren’t used to seeing where retailers have tried to get inventory from wherever to satisfy demand,” says Chapman.
Look further down the value chain
It’s always a challenge for the primary producer, who is at the beginning of the food value chain, to see what goes on further down, but in a year like 2020 it behooves them to do some research and try to follow the trends, so they can at least understand the potential impacts COVID might have on the markets they are selling into.
“I think all of us in the food industry have to communicate more with the different people in the value chain to see what’s going on, and I would urge producers to ask their buyers if they and their customers are adapting to a different consumer world than we would have planned for in 2020,” says Chapman.
That includes a shift in how people shop, which has changed a lot since the global pandemic began, and which is challenging the traditional marketing plans of some food companies.
“Consumers are not making decisions in stores the way they used to, they are in the mode of going into the store and getting out as quickly as they can,” says Chapman. “We are also seeing four times greater sales online for foods than we did prior to the pandemic, so if processors that producers are selling into have the ability to access those channels, they are probably seeing increased demand, whereas if their processor is not in that arena, they could struggle.”
Some supply chain disruptions could spell opportunities as well for Canadian producers and food companies.
“What we are seeing in the United States, because they are having a much more challenging time with this virus, is more interruptions of supply down there than normal, so there is the possibility that, whereas, in the past, there was a certain amount of production in the U.S. that would compete with our Canadian products, now that production in some places could be somewhat at risk,” says Chapman.
As well, Canadian consumers want Canadian food right now. “In the past, I would have argued that although Canadian consumers talked about wanting to purchase local food, they didn’t always do it, whereas in 2020, there are a lot more of them actually doing it,” says Chapman. “We all hoped COVID-19 would be done this year, but that doesn’t appear to be reality and we are going to be dealing with this type of consumer behaviour certainly in 2021 as well.”
Sound business management practices are crucial
A key component of weathering any crisis — and farmers have had many over the years — is to be prepared. That starts with some sound business management practices, like having a written business plan. However, 79 per cent of farmers still don’t have written plans, and when a year like 2020 comes along, it illustrates the value of having one.
“We know that farmers who invest in their management practices can increase profitability by up to 525 per cent,” says Heather Watson, executive director of Farm Management Canada (FMC), quoting findings from FMC’s Dollars and Sense report of 2015. “We also know farm business management is linked to personal well-being, including mental health and increased confidence in making management decisions.”
Planning ahead is crucial in preparing farmers to be flexible enough to adapt to unforeseen challenges. “Employing business management practices can help farmers get through tough times,” says Watson. “Planning ahead is the key. Eighty-eight per cent of farmers report following a written plan has contributed to their peace of mind.” (Findings are from FMC’s 2020 report Healthy Minds, Healthy Farms).
Planning means preparing for whatever might happen in the future and putting measures in place to mitigate risk and seize opportunity. “Plans change. They must be responsive to the ever-evolving business environment,” says Watson. “This is a key shift in current perceptions of planning, and the riskiest thing for any farm manager is to sit still and hope the business environment will return to what it was before so they can stay the original course.”
FMC’s research shows the strongest motivators for implementing farm business management practices are to manage risk, increase profitability, reduce stress, prepare for farm transition and get the business on track.
This research was done prior to COVID-19, which has no doubt elevated the stress levels of Canadian farmers and their families considerably; however, when farmers take the time to review their current positions and conduct scenario planning including best-case, worst-case, and most-likely-case scenarios, it helps provide a path forward, no matter the circumstances, says Watson.
“The business-savvy farmer is positioned to confront change with confidence and seize opportunity, carving out a steady path for resilience and sustainable growth for long-term prosperity,” she says.